Domestic polyethylene high pressure and linear price difference hits high

Recently, due to the reduction of Iranian supply, domestic high-pressure prices have risen sharply, and the linear price gap has hit a three-and-a-half-year high.

According to ICIS data, on August 17, the average daily valuation of domestic high-pressure membrane materials in East China was 9,000 CNY/ton, and the average daily valuation of linear membrane materials was 7,100 CNY/ton, and the price difference reached 1,900 CNY/ton. The highest position since January 5, 2017.

According to market news, 6 Iranian cargo ships have been unable to dock at Qingdao, Shanghai and other ports since early June, resulting in a large number of polyethylene products that cannot be unloaded. It is expected that hundreds of thousands of tons of products will be affected, and high-pressure products are among them.

The ICIS supply and demand database shows that China's total imports of high-pressure polyethylene in 2019 were about 3.43 million tons, of which Iranian high-pressure accounted for about 22% of the total imports.

Affected by the epidemic, in the first half of this year, some overseas installations were overhauled or reduced. At the same time, capacity was limited and shipments were delayed. From January to June, China's high-pressure imports were close to 1.58 million tons, a decrease of 7% from the same period last year. Although imports of high pressure increased month-on-month in June, imports from Iran still fell by about 25% month-on-month.

Iran's high pressure in the spot market is "difficult to find a single product", which has caused prices to rise. Currently, Iran's high pressure quotation has been above 9,000 CNY/ton.

Due to the lack of Iranian goods, some downstream factories are looking for other sources to replace them; at the same time, since no new high-voltage devices have been put into production in the country in the past two years, and there are many planned or unplanned shutdowns of domestic high-voltage devices in the first half of the year, the overall high-pressure supply is tight. According to the ICIS supply and demand database, the output of high-pressure countries from January to July was about 1.56 million tons, a decrease of 6% from the same period last year.

In the same period, linear supply was relatively abundant. With Zhejiang Petrochemical’s 450,000-ton/year full-density plant put into operation in the first quarter, and China exempted import tariffs for low-pressure and linear products from the United States, linear supply increased significantly in the first half of the year. The ICIS supply and demand database shows that the linear supply (production plus imports) from January to June was about 7.17 million tons, and its Chinese production and imports both increased by 11% year-on-year.

From a later point of view, no new high-pressure devices were put into production in the second half of the year, while both Bora Basel Chemicals and Yantai Wanhua both had 450,000 tons/year full-density and linear devices put into production, and linear supply is expected to increase; at the same time, the northern sheds started in September. Membrane demand has boosted some high-pressure and linear demand. If Iranian cargo is still unable to dock in the short term, it is expected that the linear and high-pressure spreads may remain high.